If you have bad credit, it can be a very long road to get your credit back on track. You’ve probably lost hope in getting a much needed loan from a traditional bank, after being turned down time and time again from these institutions. Fortunately, there is help available for those with less than perfect credit who are looking for a loan. These institutions work with people just like you on a regular basis so that you can get the money you need as well as help boost your credit score.
Higher Interest Rates
Working with these special banks does come with the several consequences for people with bad credit. You face a higher interest rate, as well as finance charges and a longer repayment term, due in part to the risk the institution is taking by lending to someone with poor credit. However, if you make regular payments in full and on time, often the lender will offer you an opportunity to refinance to lower or eliminate the interest and fees on the loan.
Lenders For Damaged Credit
If you have poor credit, there are a number of resources available to you to get the money you need, no matter the purpose of the loan. These institutions regularly work with people with poor credit and are well-versed in the approval process for these types of borrowers. Even though these lenders are willing to help you, the responsibility still falls to you. Make sure you do not borrow more than you know you can realistically repay within the time allotted and be sure to make your payments on time every month during the term of your loan. The last thing you would want to do is damage your credit even further by not following those tips.
Secured Or Unsecured?
There are two types of loans available for those with bad credit. A secured loan is one that requires that the borrower put up something of substantial value (usually a vehicle or property if the borrower owns either) as collateral. That way, the lender can claim ownership on the item should the borrower default on the loan. The approval of this type of loan comes easily and the lender will likely offer a lowered interest rate on a secure loan. For those borrowers who do not have any collateral, there is the option of applying for an unsecured loan. Unsecured loans are more difficult to obtain because it based on your credit history. With some research, you’re likely to find a lender who can help you in your situation.
Applying With A Cosigner
Another option for obtaining a loan if you have less than stellar credit is to use a co-signer. A co-signer is someone who has good credit and willing to take over the payments on the loan should you become unable to keep up with the payments. Usually borrowers choose a parent, close friend or other close relative to be their co-signer. Think very carefully about this option, as your co-signer becomes just as liable as you are for making payments on the loan, which might lead to legal action if neither of you make payments. However, most lenders release the co-signer from liability on the loan if the primary borrower makes regular on-time payments, usually after a year.